iShares € Govt Bond Climate UCITS ETF which began trading on Deutsche Börse’s ETF venue, Xetra, on 5 October 2020 offers access to Eurozone government bonds that weigh up their climate risk.

Higher emissions will result in as lower weighting, placing pressure on sovereign bonds for the first time and creating a link between climate change and government finance. To date most climate related bonds have been solely linked to corporate exposure.

The bond is supported by data from FTSE Russell, and builds on the work of the FTSE Climate Risk-Adjusted European Monetary Union (EMU) Government Bond Index (‘Climate EGBI’), with the Advanced Climate EGBI differing from the parent index by applying scores for physical risk, transition risk and resiliency in equal measure. The index is designed for index users with an increased focus on climate performance of their government bond portfolios and is the result of close collaboration with Blackrock’s team over recent months.

FTSE Russel claims the Advanced Climate EGBI is on average 26 per cent better aligned to a 2C pathway and provides an average annual GHG reduction of 204 MtCO2, or 7 per cent reduction versus the underlying EGBI index.

Brett Olson, head of iShares fixed income, EMEA, at BlackRock, said: “Sovereign issuers are facing increasing pressure to meet sustainability criteria, as more investors consider the ESG profile of their fixed income portfolios. Until today, investors have had very limited options for cost effective exposure to government bonds that incorporate climate risk. This launch is yet another example of our commitment to providing investors with more choice to build sustainable portfolios.”

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